. Tom believes the company should use the extra cash to pay a special one-time dividend. How will this proposal affect the stock price? How will it affect the value of the company?
Electronic Timing, Inc. (ETI) needs to be careful on how it dispenses the extra cash as a dividend. Issuing the extra cash as a dividend would mean that the shareholders collectively will probably drop by the same amount because of the transfer of wealth from the company to the shareholders individually. Hence, the economic value of the company will also decrease.

2. Jessica believes that the company should use the extra cash to pay debt and upgrade and expand it existing manufacturing capability. How would Jessica's proposals affect the company?
Jessica's proposal will support an expansionary policy for the company which can result to a higher growth rate for ETI. As to the company's dividend policy, not issuing the extra cash as a dividend signals to the market that there are still better and more efficient uses of the cash than using it for dividends.

3. Nolan is in favor of a share repurchase. He argues will increase the company's P/Ratio, return on assets, and return on equity. Are his arguments correct?
How will a share purchase affect the value of the company? A share repurchase if done correctly should be equivalent to the issuance of a cash dividend with the same amount as regards to effects on shareholders' wealth. The way the share repurchases should be done in a way that it does not diminish or create shareholders wealth. Hence, Nolan's argument that the company's return and assets and return on equity will increase is not correct. However, the P/E ratio might go upwards for a time until the market corrects it.

4. Another option discussed by Tom, Jessica and Nolan would be to begin a regular dividend payment to shareholders. How would you evaluate this proposal?